Six Flags Entertainment Corp (SIX) 2013 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to the Six Flags fourth-quarter and full-year 2013 earnings conference call.

My name is Stephanie and I will be your operator for today's call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

I will now turn the call over to Nancy Kresja, Senior Vice President, Investor Relations and Corporate Communications for Six Flags.

Good morning, and thank you for joining our call.

With me are Jim Reid-Anderson, Chairman, President and CEO of Six Flags; and John Duffey, our Chief Financial Officer.

We will start the call with some prepared comments, then open the call to your questions.

Our comments 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.

And the Company undertakes no obligation to update or revise these statements.

In addition, on the call, we will discuss non-GAAP financial measures.

Investors can find both a detailed discussion of business risks and reconciliation of non-GAAP financial measures to GAAP financial measures in the Company's Annual Reports, Quarterly Reports, or other forms filed or furnished with the SEC.

At this time, I will turn the call over to Jim for his prepared remarks.

Thank you, Nancy, and good morning.

I am really proud to share that we delivered a fantastic fourth quarter.

And, as a result, 2013 became the fourth consecutive year of record performance for Six Flags.

Despite some headwinds earlier in the year, revenue in 2013 grew 4%, over $1.1 billion, while adjusted EBITDA grew 7% on a comparable basis to $404 million, a new record for the Company.

Simultaneously, we were able to increase guest satisfaction ratings to new all-time highs, grow attendance and revenue, and increase the profitability of our business to a new industry high, 40% EBITDA margin, by remaining focused on execution of our business strategy.

Since 2009 we have more than doubled EBITDA, almost doubled EBITDA margin, and we have radically improved guest satisfaction scores.

The Company has great momentum.

Our pricing and ticket yield model is working very nicely.

And similar to 2012, we registered price improvements in every single category in 2013.

Throughout 2013, we saw strong revenue growth in all key initiatives, including our flash pass virtual queuing system, our in-park culinary services, and our corporate alliance program.

I have been particularly pleased with our success in driving food sales through our all-season dining pass program.

Multiyear initiatives such as these will provide exciting growth opportunities for the Company for many years to come.

And our innovation continues.

One example is our new biometrics system, which is being rolled out to our parks in 2014.

It eliminates the need for us to take photos of our guests when they process their Season Passes, and then guests can enter our parks by simply pressing their finger on a scanner.

We tested the biometrics season last season in San Antonio, Dallas and Chicago, and it significantly reduced Season Pass processing time for our guests and park entry queue lines.

The innovative system also reduced our labor costs.

Initiatives like this will allow us to continue enhancing the guest experience and help us further improve our industry-leading margins.

The fourth quarter of each year is a special time at Six Flags.

We delight our guests in unique ways with two of our signature offerings -- Fright Fest, when we transform our parks into Halloween theme scare zones; and Holiday in the Park, when our parks are transformed into winter wonderlands with millions of sparkling holiday lights.

Both have grown to become significant brands for us, and an opportunity to sell more Season Passes and memberships to Six Flags.

In fact, Fright Fest 2013 was our best-ever, as we increased our investment in the offering and guest satisfaction rose to new heights.

These types of events extend our operating season, allowing us to utilize our available capacity, leverage our fixed costs, and provide a diversified product offering to single-day guests, as well as our loyal Season Pass and membership base.

As a result of our constant innovation, elevated guest satisfaction and higher employee morale, our return on invested capital has improved by almost 1200 basis points since 2009, coming in at 14% for 2013.

I anticipate that we will see ROIC improve further over the next few years.

Cash EPS for the year was $2.45, an increase of 13%, and we are returning all of our free cash flow to our shareholders.

We raised our dividend in the fourth quarter to $0.40 per share per quarter, and used the balance of our free cash flow, plus some of the proceeds from our 2012 debt refinancing, to repurchase 14% of our outstanding shares in the year.

Since we began our dividend and share repurchase program three years ago, we have collectively returned $1.2 billion to shareholders while maintaining the lowest leverage ratio in the industry.

I continue to believe our share repurchase program represents a tremendous value for our shareholders.

We will continue to use our excess cash flow to repurchase shares, and also reward our shareholders with a stable and increasing cash dividend, which is currently one of the highest dividend yields in the market.

In summary, it was an excellent quarter and an excellent year for Six Flags.

I am so very proud of my colleagues for achieving new record highs in guest satisfaction scores, including the ratings for value for the money, safety, and overall satisfaction, all while delivering the best-ever employee satisfaction survey results and record financial performance.

At this time, John Duffey is going to provide more details on our financial results.

John?

Well, thank you, Jim, and good morning to everyone on the call.

We are very pleased with how we finished the year with strong performances across the board.

I will start with a discussion of our fourth-quarter performance and then provide details for the full-year 2013.

Revenue for the quarter increased $10.3 million or 7.1%.

This increase was driven by a 1.4% growth in attendance and a 5.7% or $2.24 increase in total revenue per capita.

As Jim mentioned earlier, we view our October Fright Fest in December Holiday in the Park events not only as drivers of incremental attendance and guest spending, but also as a key component to our success in retaining and growing our Season Pass and membership programs.

Despite being hit with uncharacteristically bad weather at our Texas parks in December, the solid attendance growth in the quarter is a clear indication that a strategy is working well, and we will continue to invest to make these events even bigger and better for our guests in 2014 and beyond.

Our strong offerings and innovation continue to provide us with the opportunity to increase pricing across all our ticket types, which was evidenced by our admissions revenue per capita, which grew by $1.32 or 6.6%, despite a higher Season Pass and membership mix.

This increase, combined with the higher attendance, resulted in total admission revenue increasing $5.9 million or 8.1%.

We are also especially pleased with the growth we saw in in-park guest spending in the quarter, which was a direct result of the investments we made on incremental premium Fright Fest attractions such as our haunted houses and mazes, new guest offerings for Holiday in the Park, and our successful all-season dining program.

In-park guest spending increased $4 million or 6.8% in the quarter.

In addition, we saw a nice uptick in our Great Escape Lodge revenue, which was up 6.6%.

Cash operating and SG&A expenses of $107.6 million increased $3.6 million in the quarter versus prior-year, primarily due to increased marketing and labor costs relating to Fright Fest and Holiday in the Park.

The strong revenue growth resulted in adjusted EBITDA of $35.6 million versus $30 million in the fourth quarter of 2012, an 18.7% increase.

Moving to the full-year 2013 performance, total revenue for the year increased $39.6 million or 3.7% over 2012, as the result of a 4.4% increase in admission revenue and a 2.6% increase in in-park revenue.

For the first time ever in the history of the Company, total guest per capita revenue eclipsed $40 to $40.18, an increase of $0.78, with admissions per caps up $0.62 and in-park per caps up $0.16.

Both the admissions per cap and in-park per caps were dampened by the higher Season Pass and membership mix, which increased to 48% in 2013 versus 44% in 2012.

We are very pleased with our Season Pass strategy, and in particular, the membership component, which is small but continues to grow nicely and should be a key driver of guest retention.

Our membership program, which automatically renews members after one year, should create a highly reliable and recurring cash flow stream for the Company.

I am particularly proud of the Company's relentless focus on managing costs.

Cash operating and SG&A expenses increased $5 million or less than 1% in 2013, and represented 52.2% of revenue versus 53.7% in 2012, a 147 basis point improvement.

We were extremely pleased to achieve adjusted EBITDA of $404 million in 2013, representing an increase of $21.5 million or 5.6% over 2012.

Adjusting for our noncontrolling interest in Dick Clark Productions, which was sold in the third quarter of 2012, adjusted EBITDA grew $27 million or 7.2%.

Modified EBITDA margin of 40% is a company and industry high, and compares to a margin of 38.9% in 2012.

In four years, we have grown our margins by over 1550 basis points with our focused strategy, a strategy that will deliver further margin improvement in the years to come.

Full-year diluted GAAP earnings per share was $1.18 versus $3.30 in 2012.

However, as we noted in the press release, adjusting 2012 for the nonrecurring tax valuation reversal and the gain on sale of Dick Clark Productions, 2012 diluted GAAP earnings per share was $0.45, representing a $0.73 or 162% increase.

Full-year cash earnings per share, which we believe is a better reflection of our earnings versus reported GAAP EPS, due to fresh start accounting impacts and our tax loss carryforwards, was $2.45 versus $2.16 in 2012, an increase of 13%.

As of December 31, 2013, we had $0.8 billion of net operating loss carryforwards remaining.

Our total capital spending in 2013 was $102 million, right on our targeted rate of 9% of revenue.

We were also pleased with the amendment to our credit facility we completed in December.

The amendment allowed us to take advantage of favorable conditions in the debt markets and reduce the interest rate payable on our tranche B term loan by 50 basis points, resulting in $3 million of annual interest cost savings going forward.

The amendment also provides us the flexibility to use, over time, up to $200 million of our cash on-hand for share repurchases and other corporate purposes.

This transaction positioned us very well as we continue to execute our strategy of optimizing shareholder returns.

Reported net debt as of December 31 was $1.23 billion.

The Company is in a very good position with significant cash on-hand at year-end, no outstanding borrowings on its revolver, and a net leverage ratio at December 31, 2013 of 3.0 times.

Also in December, our Board authorized an incremental $500 million of share repurchases through 2015.

We repurchased $20 million or 0.5 million shares in the fourth quarter, which took our full-year 2013 purchases to $524 million or 15.5 million shares, and our year -- end-of-the-year outstanding share count down to 94.9 million shares.

We are also very pleased with the great start to our 2014 Season Pass and annual membership sales.

As a result of our strong early momentum, deferred revenue grew to $60 million as of December 31, 2013, a $7.7 million or 15% increase over prior-year.

In conjunction with the preparation of our 2013 income tax provision, we determined an immaterial correction was needed related to the December 2012 reversal of the valuation allowance we had on certain of our deferred tax assets.

We have adjusted our consolidated financial statements as of, and for, the year ended December 31, 2012 to appropriately reflect the change in income tax expense and deferred income taxes.

The impact of these adjustments is limited to the fourth quarter of 2012 and does not impact prior interim financial statements.

In summary, we are extremely pleased with the fourth-quarter and full-year performance.

For the full-year, we were able to increase attendance with strong marketable capital, excellent marketing, and a successful Season Pass and membership strategy.

We also increased guest spending per capita, even with a higher proportion of Season Pass and membership attendance.

And we effectively leveraged our cost infrastructure, resulting in record EBITDA and excellent cash flow generation.

We are well-positioned as we head into 2014 and beyond.

As we look to the 2014 season, I would like to remind you that Easter falls in the second quarter versus the first quarter in 2013.

Many school districts schedule their spring breaks around this holiday, and we operate many of our parks during the spring break week.

Therefore, we anticipate that approximately 300,000 of attendance will shift from Q1 into Q2, when you compare 2014 with 2013.

So now I'd like to turn the call back over to Jim.

Thanks very much, John.

As you mentioned, our team is now focused on delivering an excellent 2014 season.

The attractions we are introducing, several of which will set world records and are generating tremendous buzz, are progressing as scheduled, and all of our new capital investments will help us continue to build strong business momentum.

Several initiatives are really kicking in nicely, with our membership and all-season dining programs leading the way.

I am confident that our strategic pricing, yield, and Season Pass initiatives will continue to bear fruit for our shareholders for many years to come.

On an ongoing basis, we will look closely at all aspects of our business to drive growth, and we are very focused on smart cost management.

In addition, as you are aware, we continue to explore international development opportunities and are actively looking at options to dispose of our excess land.

We also remain on track to achieve our 2015 target of $500 million of modified EBITDA, which equates to nearly $3 of cash earnings per share.

As CEO of the Company, I want you, our shareholders, to know that I have never been more confident in our outlook than I am today.

And I can tell you after spending a week with our expanded management team, our top 200 leaders, that I cannot imagine a more dedicated or motivated team to dream big and take Six Flags to new heights.

As we approach achievement of our $500 million modified EBITDA goal, we will set a new long-term target for our employees and shareholders.

We are laser-focused and driven as a team, and it is important for us to keep setting new goals, raising the bar on quality of performance, and motivating our entire employee team to deliver more and more value for our guests and our shareholders.

So, to Stephanie, at this point, I'm going to open the call up for questions.

(Operator Instructions) Ahua Ahwoi, Goldman Sachs.

Thank you for the questions.

So, two questions from me.

First, on the fourth quarter, was there any impact from deferred revenue in that -- in the quarter?

And if so, where did it show up?

In admissions or in-park?

How does that work?

And then, second, I was just curious.

As you think about the mix of Season Pass and membership, and then the regular day, obviously, Season Pass mix is part of this.

How high do you think you can go?

And then as we think about the impact to per caps, is there a time we can foresee where, as you maybe start to get to the upper limit of that, maybe we ought to see a better boost from pricing as you start to lap sort of, I guess, easier compares?

John, you want to --?

Yes, I'll take the first question on the deferred revenue.

There was a slight impact associated with deferred revenue in the fourth quarter, mainly due to the shift from Season Pass over to memberships.

Typically, a Season Pass is a pass for the season.

So, 100% of the revenue is included in the year.

On membership, it's an annual pass.

So, to the extent that someone bought an annual pass, let's say, in June, that pass will continue to run until June of this year.

So, some of that revenue associated with that gets deferred into the next year.

Okay, Ahua.

Your second question was about the mix of Season Passes and memberships.

And, really, I think where you were going was, is there a limit, from our perspective, as to the number or the percentage of Season Pass holders that we would have?

And, quite frankly, there is no limit that we have, and we are not approaching anything that would make us uncomfortable in terms of a percentage.

We think we can continue to grow further.

However, to your second point or second question, once we reach that point, let's say, a few years out where we feel that the mix is at the right sort of level, you're absolutely right in that we would be able to accelerate pricing at that point on Season Passes.

So right now, we feel very good, because, as I mentioned in the narrative earlier, we have taken pricing in every single category, including Season Passes, and our per cap grew while we were actually growing our overall Season Pass percentage.

So I feel like we're in a pretty good place.

And sorry, just to follow-up on that, what sort of signs would you see that would make you start to think that you are at the limit if you were -- that you would be looking out for?

Well, I think we'd look at capacity utilization.

And you and I have talked about this before.

I think I described the Company went through a detailed analysis of capacity, and off the breakeven point at every Park.

And we do that every year -- we take a look.

But we also assess what is going on with capacity at the parks on key days.

And we really haven't had anything in the way of capacity issues apart from on a couple of days.

And the benefit of the Season Pass -- one of the many benefits of Season Pass holders is that they know when to come, and they come on days when the parks are less busy.

So, in a sense, by growing Season Pass holders, we have spread that attendance around a little bit better, and have not encountered any capacity issues.

So the key thing I'd look for is capacity problems.

Got it.

Thank you.

Ian Zaffino, Oppenheimer.

Very good quarter.

My question would be, I guess, on the land.

And I know you had hinted sort of at that.

Is there a potential -- do you think you're just going to sell it out-right?

Is there a potential to maybe develop it and maybe extract additional value from it?

Or maybe take a participation in whatever is being built on that land?

How have you thought about that?

And just help us out there.

Yes, Ian.

As you think about the land, we have a lot of excess land really at three of our parks.

And that is New Jersey, our Maryland Park, and St.

Louis.

And we evaluate different opportunities for the use of that land.

But I would tell you that it's likely that we would dispose of that land.

We don't have a need for any of that property for further expansion of our current parks.

Okay.

And then I haven't heard you speak about the land in a while.

Is that -- and you have now, and I might be wrong, but I feel like this is maybe one of the first times you have in a while.

Is that because you are seeing something?

Is kind of the market getting better, and now you feel like it's a kind of viable, call it, means of monetization now?

Or -- again, kind of help us out there.

Yes, Ian.

No, understood exactly what you mean.

And I think you will find that as we present to investors, we generally will always talk about both the land and the international opportunities.

But you are right in that we haven't highlighted it in a while.

I think that the market seems to be coming back a little bit.

So we have never stopped focusing on it.

And we will continue to keep the pressure on here, because if there is an opportunity to be able to liquidate some of those assets, we will take it.

But we are not at the point where we have anything to announce.

There's no news here.

It's more refreshing people's memories that there are a couple of opportunities that we will take advantage of at some point.

Okay.

Thank you very much.

Again, good quarter.

Thank you.

James Hardiman, Longbow Research.

Thanks for taking my call.

You guys put up a great year, especially when we think about some of the headwinds that you guys faced over the course of the year.

Now that we are heading into 2014, can you just talk -- I know you hate to blame anything on weather, but you had some rough weather early in the year; it sounds like you had some rough weather at the end of the year.

Maybe walk us through, if not quantitatively, maybe just qualitatively, over the course of the year, how we should think about 2014.

And then any qualitative color you can give us on the impact that Six Flags Over Texas had on your business over the course of last year, as we start to think about how to model 2014?

Hi, James.

With regard to the headwinds we faced, I think there were really two major headwinds.

One would be the weather that you described at various points in the year.

It was a very interesting year overall, and continues, doesn't it, into 2014.

And then the second issue was obviously the tragic accident that took place at Six Flags Over Texas that clearly impacted attendance there.

With regard to both, I'm not going to quantify and say, here is that the effect.

There was definitely an effect.

But what we found is that weather impacts pretty much every year at some point.

And by the end of the year, it all tends to equal out.

And I don't want to predict that 2014 will be a better year from a weather perspective.

We hope it will, but you can't count on that.

So what we do is we work very hard to build programs and activities that allow us to try to drive attendance increases, revenue increases, and therefore, profit and cash increases, even in very difficult circumstances.

And I think we've shown, we've proven with 15 record quarters that even when the weather is bad or where there are very difficult circumstances that we face, that we are able to manage through that and still deliver really, really strong quarters.

I really don't want to be in a position to say there were any excuses at all in 2013.

We did great and we managed tough times.

And as we face issues in 2014, we will manage our way through them.

John, do you want to add to that at all?

No, I think that covers it.

That's great.

And then on the cost side, you guys did a great job sort of on the terms of operating leverage.

By my math, about 70% of the revenue growth flowed through to the EBITDA line.

As we think about 2014 and, I guess, beyond, is that a pretty -- that's actually a little bit better, I think, than last year.

Is that a fair number to use as we move forward?

And I guess, more specifically, as we think about some of your initiatives, obviously, the vast majority of just straight price increases fall through to the EBITDA line.

But how should we think about some of the puts and takes to the leverage in 2014 and beyond?

I think in terms of costs, honestly, what we've said in the past is that we like to keep our costs in line with the inflation rate.

I think there will be some additional costs that we will have to put in place, associated with some of the costs that we took out, where we did see some adverse weather in 2013.

But our goal is to always have a relentless focus on costs and where we can leverage the infrastructure.

I think, John, the other thing that at least someone is going to ask, so I will address it head on -- there are certain states where there are minimum wage changes that are taking place.

And given the number of seasonal workers that we have, there will definitely be some effect from that as well.

But I have to maintain what I said earlier, which is, we have a brilliant lineup of Park Presidents and leaders in the Park who know very well how to manage costs.

And it's one of our top priorities to make sure that we are delivering incrementally to the bottom line every extra dollar.

Great.

And just last question here -- I think there has been a lot of conversation within the industry with regard to just the elasticity of demand.

I mean, you guys have raised prices for a couple years now.

How do you think, if at all, that's affected your attendance?

I think a lot of us have sort of been conditioned to think about attendance and per cap independently from one another.

But, ultimately, maybe we should just be thinking about the total topline growth.

Do you think, if you weren't raising prices as much as you had, that attendance would be better?

How should we think about the interplay of those two?

It's a really good question.

And James, as you know, no matter what answer I give you, we will never know for sure, right, what would have happened.

But we really believe that Six Flags historically has been kind of an unusual case.

Because the industry has gone about its business in its own way.

But Six, specifically, as you know, discounted very aggressively and kind of -- we took ourselves down.

So I think the real benefit of a Six Flags over and above anyone else is that we are still in the early stages of getting our pricing back to where we want it to be.

We're not done yet.

So we have the ability, and have been taking pricing up and growing attendance at the same time.

And you never know what's going to happen in a year.

Right?

Things can go wrong.

But I feel reasonably confident right now that that pricing strategy will continue, and that the combination of the pricing and the Season Pass membership approach that I described, and the amazing number of value offerings that we have for guests in a tougher economic environment, will continue to provide us with potential upside for the long-term.

Obviously, we'll find out at the end of the year.

But I'm feeling confident about the ability to do both.

And by the way, to do both for a number of years.

I think we're partway through this pricing program.

Perfect.

Thanks, guys.

Thank you, James.

Joel Simkins, Credit Suisse.

Guys, a lot of my questions have been answered.

But I guess, Jim, maybe from a high level, if you could just sort of give us your 30,000 foot view on the consumer.

Obviously, we still continue to get a lot of mixed data on that front.

And I guess, also, as you look at sort of some of the historical attendance data that you might have for all of your parks, is there any sort of evidence that you are coming out of harsher winters?

And assuming a bit of a more normal weather environment, that you get a little benefit from sort of cabin fever?

I do, but let me start with your second question, which is after the harsh winter, I think traditionally people do see attendance hopefully boost, because people do want to get out and do something quickly.

So, we're hopeful that that will work in our favor.

But again, you can't predict that.

With regard to the consumer overall, I think that, again, we're -- I think we're a little bit of a special case because of our historical pricing discrepancies.

But we do offer a really tremendous value to people, especially to Season Pass and membership programs, allow people to visit all year for a really reasonable cost.

I think the fact that we're providing news in every single Park, something we didn't do historically, means that people are seeing more and more and hearing more and more about the parks.

So when you combine that with our GO BIG media campaign, which isn't just on TV; it's on radio, it's at movie theaters, it's on the Internet, we are doing so much to engender entrants in our parks that I think we will continue to see consumers, who learn about us again, coming back.

Now, do they have more money to spend?

They are certainly spending more money in our parks.

But I do believe that it's very, very difficult for them still.

And I don't feel like we are out of the economic downturn of the tough economic times that we've seen over the last few years.

I think we need a little bit more to be convinced of that.

And just as a follow-up on some of your earlier comments on international franchising, managing contracts, things like that, should we be thinking about 2014 being sort of a year where you do put something on the tape in that regard?

Or is this just sort of more of a high level, hey, we're going to look at different opportunities?

Well, it's funny you should ask that question, Joel, because Nancy actually heads up this international effort for us, and she just is literally desperate to answer this.

I'm going to hand it over to Nancy.

Sure.

Thanks, Jim.

We continue to pursue what we think is a very attractive long-term opportunity for the Company.

I think Six Flags is in a very unique position because of our national and even international brand recognition, and as much as being really the only brand out there from a regional theme park company.

So, we continue to believe there is long-term growth opportunity and we continue to pursue those relationships.

So we think, again, longer-term, it will be an expansion opportunity for us to build out that franchise outside of the Americas.

Joel, it's -- I think you have heard us say this before, but it's quite amazing the number of calls we get every week.

And as you know, a large number, by far the highest percentage of them, really don't have any capability to do the sort of thing we would want to do.

But there are a number that have potential, and we are working on them and will continue to.

And we'll only do something if we really think it adds long-term value for our shareholders.

But we are working on it.

Thank you.

Thank you.

Tim Conder, Wells Fargo Securities.

Just a couple maybe a little more clarifications here, Jim.

On the Season Pass mix, the annual membership -- where is that as a percent of your Season Passes?

Again, you said Season Passes were 48%.

Where -- what's the annual membership at this point, again, coming from a small base?

Where is that?

Yes.

In the 48% that we reference is a combination of the Season Pass and membership.

And we do not break out the -- exactly how much of that is membership versus season.

What I can say, though, Tim, which I think will be helpful to you, is that that membership base is growing, and it's nicely growing.

So I think it's a really good program and an excellent complement to the overall Season Pass program.

And in a perfect world, you'd like the Season Passes to be at 100%, that membership program?

You mean membership to be 100% of the Season Pass of (multiple speakers) --

Yes.

-- the overall Season Pass folder?

I think it's good to have a mix.

I mean, it's appropriate to have some sort of mix.

And I wouldn't say it has to be 50/50, but something along those lines would not be a bad mix at all.

Okay.

And then should we anticipate the in-park to grow at a faster pace than Season Passes on a go-forward basis, given that the focus -- I know, again, you brought your all-season dining in 2013.

But the emphasis has been more on Season Passes.

And as you said, there's still more opportunity there.

But given where we are, should we start to see in-park accelerate at this point relative to Season Pass growth?

But Tim, you know we don't give guidance on future growth.

But I wouldn't make an assumption that in-park is going to grow faster than, let's say, Season Pass growth.

I think it would be wrong to do that.

We had a lot of initiatives on the in-park side, some of which I described earlier.

And we are very confident about the ability to continue to grow that.

But you have to also remember that -- you know, the question asked earlier about the consumer, I mentioned the fact that it's still tough out there.

So we make no assumptions about the ability to grow that at faster pace.

Okay.

And then I think you had alluded in the past that, potentially, your CapEx as a percentage of your total revenues, there -- potentially, that could start to come down.

Can you just give us a little update there, Jim?

Yes.

I think we've mentioned that we -- we look at CapEx as many companies would look at their R&D.

We have the opportunity there to spend 9% of revenue.

And really, by doing this and building that program, it kind of set the basis for what the rest of the industry is now doing.

Our view is that, over a period of time, as the Company continues to grow and get more scale, we will be able to scale that back a little bit.

We're not going to do it this year, for sure; but going forward, that is something that we could scale back a touch.

And then the last question here -- you had tested a weather guarantee in the Northeast in 2013.

Can you just sort of just revisit how that went?

And then are you looking at that as part of -- as your comment before, you always have to deal with weather, it's always there and how you manage it; but are you looking at rolling that out elsewhere?

Actually, the test is still going on.

And believe it or not, the results that we saw last year in New England were very, very positive.

And we are leaving up to Park Presidents this year if they would like to extend it, they have the ability to do that in their parks.

But it has gone extremely well and there's no negative impact.

In fact, guests loved it.

Great.

Thank you.

Barton Crockett, FBR Capital Markets.

Thank you for taking the question.

I was curious about the -- probably a little bit more on the per cap metrics, which, on a reported basis, turned positive, much more positive than we saw in the first three quarters of the year.

Obviously, this is obscured by the membership kind of percentage growth.

But I was wondering, is this trend that we saw in the way we view the numbers, the reported per caps, is this something that looks sustainable into next year?

Or is this something that's really more a function of kind of the small season and some holiday promotions that maybe wouldn't be so sustainable?

Well, Barton, I think that overall, if you look at the year, we had really nice per cap and attendance growth -- very, very difficult to do, as I've mentioned earlier.

We don't predict what's going to happen down the road.

I'm not going to say the per caps are going to grow again.

But I would say to you that, based upon what we've seen, we would feel confident that we can continue to see a nice per cap improvement.

Now, if we see really big acceleration in the percentage of Season Pass guests, then that will put pressure on it.

So, I can't say to you it's going to be a certain percentage, but we feel confident about the ability to continue to grow that nicely.

So.

the fourth quarter was very strong.

We had Fright Fest and we had Holiday in the Park.

We had a very strong showing then, and I think that that was a really solid performance both for the quarter and the year.

Okay.

And then I was curious.

As you look out a few years in the future, as you use up your NOLs, if you could update us on your current thinking about the potential to adopt a real estate investment trust structure or some other kind of tax-advantaged structures there at Six?

How much of an opportunity do you think there is for that?

Yes.

And let me first talk to the NOLs.

So, as I mentioned, we have approximately $800 million of tax loss carryforwards for federal purposes; even more than that for state purposes.

And based upon our projections, we anticipate that that will take us through at least the end of 2017.

So it would be 2018, at a minimum, before we would -- actually are paying US tax.

Barton, we look at all kinds of different opportunities in terms of evaluating ways, either from a structural standpoint or others, that we may be able to reduce the amount of tax that we pay once those NOLs are exhausted.

REIT is one of those things that we are evaluating as well.

And, John, just to be clear, because I think there was some question previously, there is no reason we could not become a REIT.

Right?

So that's something we could do.

It's obviously a function of getting approval for that, but that is something that we could do in time.

We have no need to do anything right now.

(multiple speakers)

No, with the NOLs -- yes.

And when we say we have the ability to become a REIT, the Company on its own does not qualify as a REIT.

What we would have to do is split into two companies, similar to what you've seen with other REIT conversions recently.

Okay, great.

And then if I could ask just one final question.

As you approach your 500 EBITDA --modified EBITDA target for 2015, there's some stock incentives that get awarded to management as you achieve that.

Could you update us on what it would take to reach that, and how that would kind of affect the income statement?

And what the potential is to see that in 2014 -- or the event in 2015?

Well, first, John -- I'll let John talk about the specific impact on the financial statements.

I think that if we were to get to the targets in 2014, which is a stretch, obviously.

I think all shareholders would be very happy because the performance of the Company would be so strong.

You asked specific questions, and there is a target award for achievement of what we've described as Project 500.

And that would equate to about 2.65 million shares if the plan is achieved in 2015.

And it could be up to 3 million shares if we were to hit that target earlier in 2014.

John, do you want to add anything to that?

Yes.

Of which half of that would actually be granted in 2014 -- and the rest if we hit the 500 in 2015 -- of that 3 million.

Okay, great.

Thank you.

Your final question (multiple speakers) --

(multiple speakers) I just want to add on one -- Stephanie, sorry to do that.

I want to add on one point.

And I referenced this, and I think this is maybe where, Barton, you had the question from.

We would not stop.

I think that as we got close enough to the $500 million target to make it reasonably likely that we would achieve it, we will be setting a new long-term target for the Company and for our employees.

And I think again this should be very beneficial for our shareholders.

Sorry, Stephanie, I interrupted you.

Your next question comes from the line of Ian Corydon with B. Riley & Co.

I'm just curious what you have planned in terms of the number of operating days in 2014 versus 2013?

The operating days will be very similar to what we saw in 2013; no material increase or decrease.

Okay.

And in terms of the Fright Fest promotion, growing up from here, is that more about more premium attractions and better marketing in order to grow that this year, given that it sounds like operating days might be kind of flattish?

Yes, operating days will be flattish.

But I think we -- Ian, we never stop innovating in terms of the offering itself.

And I think we've mentioned that we have invested quite aggressively behind Fright Fest.

And what we are seeing is continued investment in that, both Fright Fest and in Holiday in the Park, and we are seeing building momentum in terms of not only the brand recognition, but building momentum in terms of attendance.

So, we feel pretty good about the ability to continue to drive both those products in the fourth quarter.

Great.

My other questions were answered, thanks.

Thanks, Ian.

At this time, we have reached the allotted time for questions.

I will turn it back over to management for closing remarks.

Thanks very much, Stephanie.

I'd like to thank you all for your time this morning, and for your ongoing support of our Company and the management team.

You have my promise that we remain singularly focused on building shareholder value in the years ahead.

Please make sure, though, that you buy your Season Pass early, so you can visit our amazing parks and ride our new record-breakers like Zumanjara, the tallest drop ride in the world, and Goliath, the tallest, fastest and steepest roller coaster on the planet, among many other exciting new attractions.

Take care.

That's the end of the call, Stephanie.

Thank you.

This concludes today's conference call.

You may now disconnect.