Six Flags Entertainment Corp (SIX) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen.

Welcome to the Six Flags Incorporated first quarter 2009 earnings conference call.

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

At this time, all participants are in a 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 call, Ms.

Sandra Daniels, Vice President of Communications.

Please proceed.

Thank you, Mary.

Good morning, everyone.

Earlier today the Company released it's financial and operating results for the first quarter ended March 31, 2009, and revenues through April 27th, 2009.

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, and it's Form 8-K filed on May 7, 2009.

Both of which are posted on its website, for a detailed discussion of these risks.

Because the webcast is hope 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 CEO.

Mark?

Thanks Sandra.

Good morning everyone.

As you know we launched our exchange offer, we are early into the period, and we are not going to offer any partials at this time.

So with regard to the restructuring, again we have launched the change offer, we are early into the period, but we are not going to give any partials at this time.

We are giving our creditors well in excess of the minimum 20 days to consent.

If successful, this restructuring would eliminate approximately $870 million of debt, and the $300 million plus peers obligation we have.

If the exchange offer is successful, we would still be left with $1.4 billion of debt.

So clearly not a dream situation.

But certainly a much better situation than we are in today.

Just to preempt any questions about specific conversations with specific creditors, we and our advisors are having dialogue with anybody and everybody, at this point.

And that is all I am going to say about those conversations.

We know it will be challenging to obtain the level of participation required to make this offer work.

We know we are asking a lot.

We know we have set the bar high.

But we absolutely want this to happen.

And we believe it is in the best interest of all of our stakeholders.

An in-court restructuring is not our desire, never was.

Comes with increased risk, but as we said in the beginning when we launched this process, we will do, and are still committed to do whatever is necessary, to right this balance sheet we inherited.

I continue personally to be bullish and energized, just thinking about the heights to which this Company can soar, once we truly balance, 'balance' the balance sheet.

Our performance last year speaks to that.

The overall turnaround of this Company speaks to that.

And the strength, vision, leadership, and creativity of our management team speaks to that.

Now turning to the business.

I would tell you that the performance should be viewed through April 27th, due to the Easter shift this year.

Looking at our first quarter, simply isn't a realistic view of the business, given the Easter shift.

I also want to remind you that quarter 1, Q1, represents approximately 5% of the Company's annual revenues.

Attendance thus far represents less than 3 million guests, and as you know, last year we did 25.3 million total visitors, so bottom line, it is early.

So looking at our performance through April 27 when all the spring breaks and Easter true-ups, all of the spring breaks are over and Easter true-ups, our revenue is down 10%, or $12 million.

Here is how the $12 million breaks out.

$8 million of that $12 million, is driven by foreign exchange, related to our Mexico park.

In other words, the dollar versus the peso.

And part of the $8 million is reduced sponsorship licensing revenues, driven by a reduction in our international licensing fees.

We have had a couple of international licensing deals, namely China, expire that we do intend on renewing or replacing, but haven't done so yet.

I also mentioned on the last call that our Dubai Park soon to be, might be delayed a year or two.

I wanted to tell you today that it will officially be delayed a year, and the associated fees related to our services in that deal will as well.

So that is the $8 million, reduced international licensing fees, and the hit we are taking on foreign exchange with our Mexico park.

So that leaves us through April 27th, down just 4%, $4 million.

And that $4 million is split between attendance and in-park spending.

Now of the 50,000 in attendance that we are down through April 27th, 16,000 of the 50,000 is directly related to the Swine Flu threat in Mexico.

More on that in a moment.

So bottom line is aside from the foreign exchange, which isn't working in our favor, and probably won't get any better with our Montreal park set to open.

We are pretty close to being flat in revenue, versus last year.

And considering this economy, we will take that for now.

While uncertainty is the headline for almost every consumer facing business, or any earnings call these days.

It most certainly is for Six Flags as well.

I am still at this point cautiously optimistic about the summer ahead, once schools actually let out.

Given the performance we had at several of our parks during spring break with good weather, San Francisco specifically set some records, Dallas, our Six Flags over Texas park in Arlington set some records.

Six Flags is uniquely positioned and consumers are now looking to us, to provide a diversified entertainment experience for the entire family, at a price they can afford.

That is a unique position to be in.

We have worked hard to get there.

Similar to last year but obviously to a much greater degree, staycations are a reality for most families today.

It is in that kind of environment that Six Flags is truly a force.

With major new attractions in every park, when our competition in the local market is predominantly cutting back.

With literally over 120 concerts this year, our biggest slate in the history of the Company, and 109 to be exact, 109 new stage shows, system-wide for our guests.

With strong consumer word of mouth on our park operations and our guest service, with the best qualified and trained work force in our history, largely driven by unemployment this year, and the fact that we are hiring so much.

With a value pricing headlined by our everyone pays kids price offer, which has resonated, with a longer season, extended hours, and being close to home, we are indeed in a unique position.

Maybe most importantly, given the repositioning of our brand, and our product offering these last three years, we have more for the entire family to do, than ever before.

Moving to other revenue drivers.

I told you on the last call that we would give you an update and a forecast on sponsorship revenue, specifically corporate alliances, when we are further into our selling season.

While we are actually right in the heat of it now, and nothing is yet totally clear, I do believe it is safe to say at this time, that will be difficult to get the breakeven revenues with last year on corporate alliance sponsorship.

Combine that with a loss in international licensing fees I spoke about a moment ago, and we are forecasting to be down 20%, from the 59 million we achieved in the sponsorship and licensing category last year.

Having said that, I do want to mention that I am pleased with the level of business our corporate alliance's team has been writing, especially as of late.

Very much in synch with some of the reports from the ad sector, local stations, CBS yesterday, Fox the day before that, Disney I think the day before that.

The ad sector is heating up for us as of late.

And while I am not satisfied with where we are at right now by any measure, I am heartened.

I am involved of course, or in the know, with several companies that rely on sponsorship and ad revenue as a meaningful revenue driver, from the Tribune Company, to Live Nation, to sports teams like the Redskins, and I can tell that you Louis Koskovolis and his team are making tremendous inroads, in positioning Six Flags as an out of home advertising solution for marketers.

Something clearly really unimaginable years ago, but it is happening today.

The 360 multi-sensory approach Lou and his team have developed, and are executing, is certainly making noise in the market place.

This is a genuine platform for significant growth in the years to come.

Just need to see the ad sector get healthy again.

And it seems that it is turning that way, slowly but surely.

As far as group sales go, that is really our biggest challenge in the business right now, corporate outings are clearly cutting back in this climate.

And we are seeing our share of challenges.

On the other hand, season pass sales are up.

Which is just another indicator of the consumer in today's economy looking for value.

Of course, I would highlight the more season passes we sell as a percentage of our overall attendance, and the more time they visit, the greater the risk on our guest spending per capita.

But, at the same time I do want to highlight that I am pleased with how we are tracking on season pass sales.

Finally, let's take a moment to address the H1N1 virus, or better known as the Swine Flu.

While we didn't have any issues with the scare or the threat at the Mexico park, our Mexico park itself, or among our guests there, the Mexican government did shut down our business, as they did with all schools, every outdoor venue, and retail business in the city for a period, really across the entire country.

At first, for three days they just shut down all of our indoor food outlets and indoor rides, so we took a hit in our guest spending.

Then they went ahead and shut down the whole park for eight days.

We are opening back up today, but all-in-all, I would guess at this point, we will most likely lose at least 100,000 in attendance this year from that park alone, due specifically, pointedly to the lost operating days.

Of course, this doesn't take into account any lingering impact of the scare, or the threat on the rest of the season, or God forbid, if the virus rears it's ugly head again.

We really didn't see any impact in any of our other parks.

We saw initial softness at our Six Flags over Texas park, that I would personally attribute to the scare, but like the East Coast these past 10 days, Six Flags over Texas has had enough bad weather there, you saw what happened to Jerry Jones' Cowboys practice facility, that it is really difficult to get a true gauge on what was weather and what was the virus threat.

Of course, having the Fort Worth schools closed due to the virus for what was to be three weeks which is what was initially announced, never helps business, but at least it is good to say now that the Fort Worth schools are back in business, and kids are back in school.

Really as of yesterday.

So that is where we are with the Swine Flu.

In closing, for my comments, I would say that while the restructuring process and the eventual outcome of that process, is on the mind of everyone of our 30,000 employees, with these past two weeks due to weather and the flu outbreak, considerably making things trying and challenging, I would still tell you the morale of our work force is incredibly strong.

We are in constant and candid communication with every park, as you know we are hiring at record numbers, we are putting in new attractions at every park, and every full time seasonal and full-time employee are in constant communication with us.

In fact, the two men that run our park operations, Mark Quenzel and John Odom have just finished a nationwide tour hitting every single park, conducting lengthy town meeting sessions with our employees.

So our employees feel good.

They are energized for the summer season.

They are anxious to get the 'process' as we are calling it behind us, and tomorrow our Lake George park opens, so that leaves just Montreal to open on May 16, and we will be at full power.

These are challenging times to be sure, but with inspiring leadership and accountability, accountability across the board at every park and at every supervisory position, we are standing tall at Six Flags.

Now I would like to turn it over to my CFO, Jeffrey Speed, to take you through our performance in more detail, and also discuss the partnership park put transaction, that is scheduled to take place in mid-May, thank you.

Jeff.

Thanks Mark.

Good morning.

I am just going to spend a few minutes reviewing our first quarter 2009 results giving a little more details, including our revenues through the last weekend of April.

Which as Mark mentioned will allow for a more meaningful comparison of our year-over-year results, as this will include the Easter and spring break periods in both years.

After doing that, we will hope the call up for Q&A.

Our revenues through April 27, which includes the last weekend in April were down $12 million, or 10% from the prior year period.

Reflecting a weaker Mexican Peso accounting for $5 million of the reduction, and reduced sponsorship, licensing, and other fees of $3 million, due to lower international fees as Mark mentioned.

For that same period, our total attendance was down 2%, or approximately 50,000 guests.

However, our paid attendance which excludes comps and promotional tickets, was slightly higher compared to the prior year.

Our guest spending per capita, which includes ticket per cap and in-park spending per cap for the period was also down 2%, before taking into account the adverse impact of the weaker Peso on the US dollar denominated results of our Mexico City park.

Contributing to the reduction in GAAP spending per capita for the period was an increased mix of season pass visitors, which have a lower ticket per cap and who tend to spend less in park.

We have seen this dynamic since the fourth quarter of last year.

Again probably a signal of the economy, and people's search for value.

On the topic of Mexico, and specifically the exchange rate impact on our US dollar denominated results, it is important to note that the Peso weakened by approximately 30% compared to the prior year period.

As well as the fact that our Mexico City park represented 38% of our total attendance for the quarter, and 25% of our total attendance through the last weekend in April.

And staying on the topic of Mexico, as Mark mentioned earlier, our Mexico park has been closed for the last eight days at the direction of the Mexican government, as a precaution related to the Swine Flu outbreak.

Yesterday, the park obtained permission to reopen today.

The closure during that eight day period, will result in approximately $3 million in lost revenues.

Notwithstanding foreign currency impacts and and Swine Flu concerns, we are encouraged by the performance of our park business so far this year, while at the same time acknowledging it is still very early in the operating season, with our full-time operations generally beginning Memorial Day weekend.

As far as revenues from sponsorship, licensing and other fees are concerned, Mark mentioned we are currently expecting a 20% reduction from the $59 million we generated in 2008.

Our revenues for 2009 will be impacted by the timing and extent of new international development opportunities, as well as the timing of the services to be provided related to our existing international deals.

Through April 27, our licensing revenues reflect the reduction of approximately $5 million due to those drivers.

And although sponsorship revenues were stable for the period, and we continue to believe we provide advertisers a compelling out of home advertising solution, we have to acknowledge that we are not immune to the fact that companies are shrinking advertising budget, and/or going through their own balance sheet restructuring, as is the case of our current partner, Chrysler.

With respect to first quarter costs, our total operating costs and expenses benefited from the weaker Mexican Peso by approximately $3 million.

As well as the timing of Easter and spring breaks, this resulted in our costs being down approximately $10 million, or 6% compared to the first quarter of 2008.

Our net loss from continuing operations improved 8%, or $12 million compared to the prior year quarter.

This was due to lower interest expense, reduced operating expenses, and improved equity pick-up from Dick Clark Productions, whose prior year results were adversely affected by the cancelation of the Golden Globes Awards, due to the writer's strike.

Partially offsetting the lower cost was the impact of our reduced revenues for the quarter.

We ended the quarter at close to $80 million in unrestricted cash, to fund our operating needs during the second quarter.

One of the funding needs that arose during the second quarter, was related to our annual obligation to offer to purchase units in the Limited Partnerships that own Six Flags over Texas and Six Flags over Georgia, including Six Flags Whitewater, Atlanta.

Historically, the total number of units put to us on an annual basis has been no more than 1 million to $2 million.

In light of the economy in general, and specifically investors need for liquidity, this year approximately $66 million worth of units were put to us.

The puts are required to be funded by May 15.

After taking into account the election of the third-party General Partner in the Georgia partnership to purchase half the units put for that partnership, our funding requirement is approximately $59 million.

In order to preserve our unrestricted cash to fund our operating needs, we were able to obtain from Time Warner, a commitment to loan approximately $53 million to our subsidiaries that are obligated to buy the units.

Time Warner also agreed to allow us to release $6 million of funds from escrow, which was pledged for their benefit under our partnership park agreements to be used to purchase units.

The material terms of the loan are as follows.

It has a maturity of March 15, 2011, an interest rate of 14%, and requires mandatory prepayments, in July and November of each year, until maturity, in an amount, equal to the semi-annual preferred return we received from the Georgia and Texas partnership units that we own.

The loan commitment remains subject to customary conditions, including definitive documentation, which is currently in process.

I think that is pretty much covers the recap of our operating results so far.

So with that, operator we are now ready to open the call for Q&A.

Ladies and gentlemen, (Operator Instructions).

And we will wait a moment to compile questions.

Our first question is from the line of Joe Stotts from CRT Capital.

Good morning.

Couple questions please.

On the sponsorship revenue, can you provide I guess a little more commentary about the corporate alliance piece, is it that there is just, they are sort of bailing on sort of renewal, or they just want a lower rate, or what is it?

Joe, the ad market is down.

No, understood.

Go look at any business trying to drive advertising from local TV stations, to local radio, to newspapers, I mean just the overall ad business is down.

I actually think Lou has a pretty good shot to get some meaningful numbers, but it is catch-up at this point as things start to heat up.

No, understood.

And I guess what I was just asking was, I mean are they still participating in general, but obviously at a lower rate?

You just can't generalize it.

Right.

Nobody is pulling out because they are unhappy with our programs, let's put it that way.

The business continues to grow, and the response, that was my point, has just been phenomenal.

Right.

When we walk into most advertisers, they are a little skeptical and weary, explain to me what you are doing here.

This is out of home solution, I get it.

Is it just ride signage, what is it.

We take them through the program, and that is how we are able to generate the numbers we do.

We turn them on, impress them, score with the execution and get them back.

But in this market it is probably a combination of everything.

You have some marketers that are just cutting out of home out, or cutting back on television, and adding out of home.

Some marketers are just cutting their overall budget completely.

Some marketers that just can't experiment right now with their ad dollars.

I mean it is a host of issues.

The ad sector itself is down, and we are just a small cog in that wheel.

Got it.

I got you.

Now with respect to, I guess, your expense structure at least for the year.

I mean, is it again sort of fair to assume that obviously given the cost savings that you achieved last year, it is going to be very hard for that cost structure to contract again, at some level?

Is that fair to say?

Yes.

Joe, I think we are going to stick with what we gave earlier in the year.

Which is to your point, we took a significant amount of costs out of this system last year.

And so this year we are looking, because of minimum wage impact, it is going to hit us again this year, because of pension costs given the performance of the assets under the pension, notwithstanding the fact that we froze our pension two years ago, as well as some new utility contracts that we had to renew, that were multi-year deals, those three items are going to result in our costs being up in the sort of 2% to 3% range this year.

Okay.

Thanks guys.

Yes.

Your next question comes from the line of Andrew [Chan] of Barclays.

Good morning, guys.

Quick question around the Time Warner loan.

Is that a secured loan or an unsecured loan?

It is unsecured.

But the funding from it, the loan has been made to the companies, that are subsidiaries that are required to honor the put obligations, and they are so-called bankruptcy remote entities.

And, so those entities also receive the preferred return that we get on our partnership units that we own, and those amounts are required to be utilized to repay the loan.

So albeit the loan is not technically secured, those flows are designated to repay the loan.

Got you, thanks.

And my second question is, let's say for now the Company is unsuccessful in executing out-of-court restructuring, if the Company does go through an in-court restructuring, what do you think the impact will be, in terms of attendance, public relations, et cetera?

We are not going to make any predictions on that right now.

It is too early to say where we are going.

And at the same time, it is anybody's guess when something like that happens.

You see what is happening with the car companies, but we feel good about where we are right now.

It is not like this is a surprise to anybody, with regard to in-court or out-of-court, or some of the debt problems we have been facing.

For three years there have been rumors out there about Six Flags, and an overall restructuring and cleaning up the balance sheet.

The bottom line is consumers, are our consumers, our guests, our fans, are savvy.

And as you can see from the performance thus far, they realize this is a back of house issue.

This is an inherited debt situation that the parent company is dealing with.

Meanwhile, their parks in each market are coming off record years, guest satisfaction scores that are through the roof.

Terrific performance, strong attendance, strong word of mouth, are all profitable, some very, very profitable.

And the consumers in these markets understand it is a parent company issue, and their park is going to keep growing.

And I think that is the word that will continue to get out there, because the truth just happens to be on our side.

I am not just talking other theme parks.

At a time where really every entertainment business locally is cutting back, scaling back, laying people off, looking to cut corners here or there, Six Flags is in a great position.

We are hiring more than ever before.

We have got more quality employees, and trained employees than ever before.

We are seeing a benefit from the unemployment rate, because older people and more experienced people, and better trained people are looking for work.

So we have got better staffs.

We are adding attractions.

You heard me talk about the rides.

Obviously the stage shows, obviously the concerts.

And that word of mouth is out there.

In fact, we have gotten a lot of feedback from guests who are confused.

They don't get it.

They hear all these great things great things happening about Six Flags, and the big season ahead, but then they also read about the restructuring.

So we will continue to pound the pavement through all of our communications tools and vehicles, to let everybody know it is a back of house issue, we are going to try to get it all done and cleared up once and for all in 2009, but they will not see, the guests will not see any difference in the experience this summer at Six Flags.

And if they see any difference it will only be an improvement..

Great, thank you.

Thank you.

Your next questions from the line of Kevin Coyne from Goldman Sachs.

Good morning, thank you for taking my call.

Just a quick question on the interest payment on the 9.75.

I know you had mentioned that you were going to exercise the 30 day grace period, can you just, I am assuming you haven't paid it yet and with about seven days to go here, do you plan on making that payment, and if not, in other words, do you think you can continue with the restructuring talks, and not make the payment?

Yes, we are not going to, thanks for the question, Kevin, but as we stated publicly already we are taking advantage of the grace period.

We are going to take advantage of every single day in that grace period.

And we will let everybody know what we are doing on May 14.

Excellent, thank you.

Thank you.

Your next question comes from the line of [John Drecker, Wanacre].

Thank you for taking my call.

In the first quarter, your trends were slightly negative on both attendance, and on per capita spending.

In your experience, does that carryover to your high season?

Or should we not really look into this first quarter very much?

Yes, I wouldn't make too much out of it.

If it was positive or negative.

We say this every year.

I mean 5% of our total annual revenues you heard me say, it is less than 3 million of attendance on at least last year, we did over 25 million in attendance.

As I mentioned, Q1 is totally skewed because Easter shifted this year.

I know that happens for not just other theme park businesses, but other retail or consumer facing businesses.

It is tough to look at that.

That is why the clear view is through April 27.

Still to your point revenues are down 4 million, or 4%, split between guest spending and attendance, but I wouldn't make much out of it.

The bottom line in this business, it is all about July.

Thank you.

(Operator Instructions).

Your next question comes from the line of Zvi Rhine, [Hillco] Trading.

Good morning, guys.

Good morning, Zvi.

Great pronunciation, there, Mark.

Given the $66 million in redemptions on the partnership park puts, what would have been the impact in '08 on EBITDA and cash flow with your increased equity interest.

Does it have an impact?

Yes, good question.

Basically we pay out a preferred return that shows up as minority interest on our P&L, and also on our cash flows, that is roundly 9 or so% of the value of the units, and that increases by CPI.

So if you apply 9% to 66 million, although 7 million I noted is going to be bought by the third party.

So really what we are buying is about 60 million worth of units, 9% or 9.5% is the preferred return rate.

So it is about a 5 million to $6 million pickup in terms of adjusted EBITDA.

Okay.

Very good.

And then I was noticing, on the balance sheet--

On that point, I just want to mention, the cash flow attributable to that until March of 2011, will actually go to service the loan.

So it won't be incremental cash flow, but we will pick up the EBITDA.

Correct, I got you.

And then I noticed on the balance sheet, there was a slight difference in what was reported for the end of the year '08, on the 10-K versus what was reported in this press release.

What is the discrepancy, because from what I got, and maybe I am doing my math wrong and and Excel is really messed up, but I had $2.366 billion of debt versus what is it now, $2.298 billion that you reported in the press release?

Yes we will be filing our Q later today.

What that reflects is a new accounting pronouncement for convertible debt, where we had to carve out the equity component of our convertible debt, so that you have sort of true debt imputed interest rate applying.

And so that was the change from the prior year, we adopted that new accounting pronouncement as of 1/1/09.

Okay, sounds good.

My last question as you have stated numerous times, the balance sheet will be restructured one way or the other in the coming months, and that will likely result in significant free cash flow.

Depending on the operations of the business of course, but considering the Company has never been in such a position, and bondholders now are going to be your primary equity holders down the road, what are going to be your priorities with that cash for the reorganized entity?

Will you focus on continue debt reduction or perhaps deviate from your 100 million CapEx budget the last few years, and invest in more rides and attractions?

Well, I think that is the basic capital allocation analysis that we will be going through on a regular basis.

To see what growth opportunities we have organically through our business, through acquisitions, or extensions of our brands, or alternatively, the safe route of further reducing debt.

So that is going to be something that is going to be a continuous analysis that we will be going through with that additional capital.

And Zvi, at the same time, as we have said from the beginning when the new management team came on, we are going to build this business through the guest experience, through the in-park experience.

Through great guest service which will ultimately lead to longer stays, more in-park spending, good worth of mouth, and repeat visitation.

It is a complete, it is not that people have been wrong, or they have miscalculated or exaggerated to say it is a cap intensive business, because just on the asset maintenance side or deferred maintenance side, it is certainly cap intensive.

But we don't need to be spending nor will we ever be spending the kind of capital in a calendar year, that this Company historically spent before we got here.

We are at a run-rate of $100 million.

And no matter what kind of restructuring we go through, we are going to stay just about right there.

We have a huge 50th Anniversary upon us in 2011 that we are in knee-deep planning for at the moment.

We are excited about it.

It will be a big bang, a big coming out party, and it is going to require capital, but we plan to stay within our disciplined guidelines of approximately $100 million per year.

All right sounds great.

Thanks for the time, you guys.

Thank you.

Your next question comes from the line of [Jane Pedreira, Clearsights Research].

Hi, good morning.

I just had a question on the group sales business, apparently Cedar Fair had indicated that they were booking groups, the tickets were okay, but the catering looked very soft.

I am just wondering if you can comment on the you are seeing any kind of similar trend there with the group sales?

As I mentioned, Jane, that is really our biggest challenge right now.

I mean, you are seeing that across the board.

Not just in theme parks, but sports outings, and games, obviously and some of the corporate outings that are having there.

You are running into double trouble.

You are running, one avenue takes you to place where corporations are just obviously not in a position to be having any kind of employee outings.

Then you walk down the other street, and those companies that are in a position, maybe don't want to be seen as being in the position to have an off-sight, or a corporate outing, or whatever it might be, and those that are booking are being very measured and prudent.

As they should be.

Nevertheless, in these trying times employees kind of need to get out, and let out some steam, in every way they can and have fun and be in a social environment, and put a smile on their face, and be reminded that the sky isn't falling, and that goes for families, too.

So there is still plenty of companies out there that are signing up, and obviously seeing us as a great solution, because it is a drive.

It is close to home.

But as I said we are down in group sales.

I believe we will be down at the end of the year.

We are not significantly off, but it is our biggest challenge, and I am spending some of my personal time on it as well.

The other comment was that they were speculating that the food sales in the park, people have to eat, so they probably would continue to eat, but other things like merchandise, might be weak.

Could you comment on that as well?

Yes, we are not seeing that just yet.

I mean, as you see, revenues were off $2 million in guest spending.

But we are not seeing a lot of that.

We're pretty strong in food.

I like where we stand on games and parking and rentals, and even merchandise.

I mean, I will tell you the number of transactions, are down, in retail.

But, the amount of money that is being spent on those retail merchandise transactions is up.

Okay.

So again it is very early.

I don't want do make too much out of it but we are feeling pretty good about our guest spending.

And that has been core to our turnaround strategy, since the day we arrived.

It is all about the in-park experience.

Okay.

And just one other comment to that, just to add to it, Jane, as we touched on, that the mix of our visitation will have some impact on the in-park spending, as well as the ticket per cap, and we have seen much like we saw in the fourth quarter, a higher proportion of season pass visits, in terms of our mix of attendance, and as we know, the season pass ticket per cap is below our normal promotional, or daily ticket per cap, and the season passholders tend to spend less per visit, because they are coming more often.

That makes sense.

Then in terms of pricing, if I recall, you weren't really modifying pricing significantly into this year.

Is there a point at which you would modify pricing, or like a point in the calendar where you might, if attendance isn't ramping up?

We believe we are well-positioned when it comes to delivering on the value proposition.

When you say not modifying, I mean we are at our everyone pays kids' price promotion.

We are at that level.

It worked for us last year.

It has clearly resonated in the market place.

Most of our parks are $29.99 to get in for a full day, online print their tickets at home.

Our season passes are, a number of parks we took it down, a couple of parks we took it up.

We are sitting pretty when it comes to value.

Of course we will respond, and I believe have been responsive in this economic market, but at the same time we are already positioned, and we beat people to the punch last year, when we launched the everyone pays kids' price promotion in the very early spring.

That is holding forth.

It is carrying over, and we are going to stick with it.

Okay that sounds great, thank you very much.

Hey, Jane?

Yes.

Yes, an important point that Mark mentioned that I think people should note is that our everyone pays kids' price that we launched last year, we launched it in the early spring.

Our entire first quarter last year we did not have that everyone pays kids' price, which we did have this year.

From a comparative perspective, that I think is a good sign in terms of where we ended up on ticket per cap, notwithstanding that reduction being in place this year.

Okay.

Thank you for pointing that out.

All right, thank you.

Thank you.

Your next question comes from the line of David [Bonnano, Birdpoint].

Hi, good morning, fellows.

Quick question just as it relates to the Time Warner loan.

You guys said that loan resides at the partnership parks.

And I thought I heard you say that the loan would be serviced with cash flows at those parks, should I think about that loan as being cash flow neutral then, to have Six Flags Inc's reporting level would be?

Yes, basically the loan, it doesn't reside at the partnership parks.

It resides at the entities within the subsidiaries that we own, that hold the Limited Partnership units in those parks.

Okay.

And those entities are also the obligors on the put obligation.

It is not a loan down at the partnership park level, but you are correct, that the cash flows we get from our units in the partnership parks are designated to repay that loan.

So from a free cash flow perspective, it is a push, to get those loans paid off.

Got it.

Okay, great.

And then secondly, just on the sponsorship and partnership revenue this year being down 20%, should we be thinking about that revenue stream as being 100% EBITDA contribution margin, or lower, or I mean should I just be taking--?

90% margin.

How much?

90.

90, okay.

So that will be a pretty significant hit to EBITDA?

Yes.

Okay.

Okay.

Thank you.

Thank you.

Thank you, I would now like to turn the call over to management for closing remarks.

In closing, as I mentioned in the press release, there are two things happening right now at Six Flags.

You have got the restructuring process, and then of course the business, with all of our parks opening full time Memorial Day weekend.

For the benefit of the business and our stakeholders, including our 30,000 employees, we are committed to resolving the restructuring process this calendar year.

In the meantime, the strength of our product and positive word of mouth circulating among our customers, serves as a constant reminder, that the guest experience is, and will always be priority one at Six Flags.

Six Flags is a strong brand with a resilient business.

We are seeing that already this year.

We have been responsive to the economic environment, and our parks are well-positioned to deliver a high quality close-to-home entertainment experience, at a price families can afford this summer.

While many of our competitors are scaling back, Six Flags is launching major new attractions in every park, including four coasters.

As I mentioned 120 concerts, 109 new stage shows.

And we are hiring, or have hired the best trained work force in our history.

And just to put this in perspective for you, keep this in mind.

If every seasonal employee walked out of great adventure tomorrow, we could back-fill every single one of those 4,000 employees.

That is how deep we are, and how successful we have been with our job fairs, which of course have generated a great deal of media attention these past couple of months.

For the family, for the consumer, for the guests, Six Flags is a sure thing, for a great and memorable family getaway this summer.

Talk to you next quarter.

Have a great summer.

Thanks.

Thank you for your participation in today's conference.

This concludes the presentation, and you may now disconnect.

Have a great day.