Six Flags Entertainment Corp (SIX) 2016 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Six Flags fourth quarter and full-year 2016 earnings conference call.

(Operator Instructions)

It is now my pleasure to hand our program over to Steve Purtell, Senior Vice President, Investor Relations and Treasurer.

Please go ahead.

Good morning and welcome to our fourth-quarter call.

With me are John Duffey, President and CEO of Six Flags; Marshall Barber, our Chief Financial Officer; and Nancy Krejsa.

We will begin the call with prepared comments and then open the call to your questions.

Our comments will include forward-looking statements within the meaning of the federal securities laws.

The 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 reconciliations 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 John.

Thank you Steve good morning everyone.

I am pleased to share that we had a very strong finish to the year.

We generated record attendance, revenue adjusted EBITDA, and modified EBITDA margin for both the fourth quarter and full year, making 2017 our seventh consecutive year of record financial performance.

Full-year revenue of $1.3 billion was up 4% and adjusted EBITDA was up 5% to a new all-time high of $507 million.

I could not be more proud of our fantastic team members who helped us achieve these results.

Our attendance for the current portfolio of parks surpassed 30 million guests for the first time in our history.

The 5% increase in attendance was driven primarily by our continued focus on migrating one-day ticket users to season pass holders and members.

Our incredible lineup of new rides, our continued investment in special events such as Fright Fest and Holiday in the Park, and our industry-leading innovation including our successful introduction of virtual reality coasters.

We were able to leverage this attendance growth to increase in-park revenue for the year by 4%.

We were also able to increase ticket prices throughout the year as our pricing strategy continued to work extremely well.

Pricing remains our biggest growth opportunity going forward.

And in fact, our value-for-the-money rating hit another all-time high in 2016 for the sixth year in a row.

Our full-year modified EBITDA margin grew to a Company an industry record 41.3%.

I'm even more pleased that our full-year modified EBITDA less CapEx margin of 31.5% remains by far the highest in the theme park industry by several hundred basis points.

Even after the additional investment in our new water park in Mexico.

We believe modified EBITDA, less CapEx, is the best metric to evaluate cash generation in the theme park industry and demonstrates the strength of Six Flags operations.

Our Active Pass base, which represents the total number of guests who have purchased a season pass or who are enrolled in the Company's membership program, increased 15% at the end of the year.

We are particularly encouraged that the number of members who have stayed with us after their initial 12-month commitment period continues to increase creating a recurring and growing stream of monthly revenue.

This significant growth in our base of season pass holders and members position us very well as we head into the 2017 operating season.

Our strategy remains focused on being the premier regional theme park operator in the industry and our seven-year string of record financial results shows we have the right strategy in place.

First, we are focused on delighting our guests and ensuring they have a fun, safe and thrilling experience when they visit our parks.

Second, we consistently lead the industry in innovation and have been the first mover on many products and services.

Our park product offering in 2016 was clearly the best in our Company's history and we have an even better lineup coming in 2017.

Our 2016 rollout of 19 virtual reality coaster experiences at 12 of our parks, was highly successful and our decision to include VR with the price of admission was one of the many reasons so many people came to our parks this year.

We created four different virtual worlds in 2016 including VR offerings uniquely designed for our Fright Fest and Holiday in the Park events and we gained many insights in our inaugural year that we will use to continue improving the VR experience for our guests.

In 2017 we are taking our VR offerings to a new level.

For example we are introducing the world's first mixed reality coaster, Galactic Attack, where you participate in the battle to save the planet from an impending alien drone invasion.

For the first time ever we are combining virtual reality, augmented reality, and complex game-play allowing riders to make key decisions during the course of the ride that can affect their scores.

All while experiencing the adrenaline rush of riding a roller coaster.

We think that combining virtual reality technology with our existing roller coaster infrastructure, is a game changer for our Company because it allows us to enhance guest experiences at minimal cost.

We have also innovated and invested more in special events making Fright Fest bigger and scarier and making Holiday in the Park more merry and special.

With the addition of Holiday in the Park at Six Flags America and Six Flags St.

Louis in 2016 we now offer this event at nine of our 13 park locations.

It is clear from guest feedback that Holiday in the Park has become a family tradition during the winter holidays and will continue to grow for years to come.

The evidence of our success in these special events is seen in our fourth-quarter financial performance.

Third, we continue to drive operational efficiencies and are the only theme park operator to increase EBITDA margins every year for the past seven years.

We continue to generate, by far, the highest EBITDA less CapEx margin in the theme park industry.

Fourth, we consistently deliver financial excellence.

Our increasing cash flow and efficient capital spending allow Six Flags to return a high percentage of revenue to our shareholders every year in the form of a growing dividend and share repurchases.

Over the last five years we have consistently delivered cash flow growth and a dividend yield that is double the S&P 500 making us the ultimate growth and yield stock.

Our international licensing revenue, membership strategy, and expansion of special events in our shoulder months have helped smooth our revenue and make our business less seasonal.

Finally, we have by far the best team in the industry who continue to deliver year after year.

I have never worked with a more dedicated group of people and we have a deep pool of experienced talent to lead us forward.

All of these areas contributed to our success in 2016 and we are extremely well-positioned for the 2017 season and beyond.

So now Marshall is now going to share a few more details and our financial results.

Marshall?

Thank you, John, and good morning to everyone on the call.

We are very pleased with our strong finish for the year given the robust attendance gains, revenue growth, and record profitability in the fourth quarter.

I'll start with a discussion of our fourth-quarter performance and then provide details for the full-year 2016.

Attendance in the quarter grew 22% due to an increase in both season pass visitation and single-day admissions.

The attendance growth was a result of investments in our Fright Fest and Holiday in the Park events both of which helped drive incremental attendance across all of our parks.

These types of events are key drivers of our success in retaining and growing our active base of season passes and memberships, and the solid attendance growth in the quarter, is a clear indication that our strategy is working well.

Revenue for the quarter was a record $239 million an increase of $22 million or 10%.

This increase was driven by a 14% increase in both admissions and in-park revenue.

Foreign currency exchange, particularly the further weakening of the Mexican peso, continue to negatively impact our results.

Adjusting for foreign currencies, guest spending revenues were up $32 million or 17%.

Guest spending revenue growth was a direct result of the higher attendance, new culinary offerings for Holiday in the Park, and our successful all-season dining program.

The growth in guest spending revenues was partially offset by sponsorship and international licensing fees which were down $5 million.

This decline was due to a reversal of revenue that was previously recognized in connection with our Vietnamese partnership as a result of our partners failure to fulfill their contractual obligations.

We have delivered a notice of default to our partner and stopped all work on the project.

We're currently working with our partner to remedy the situation and believe this is merely a timing issue.

Excluding this revenue reversal, sponsorship and international licensing revenue for the quarter would have been essentially flat versus prior year.

The significant growth in the mix of season pass attendance and the negative effect of foreign exchange rates put downward pressure on guest spending per caps which were down $2.48 or 7% for the quarter.

On a constant currency basis guest spending per caps were down $1.56 or 4%.

Cash, operating and SG&A expenses increased $5 million or 4% in the quarter primarily due to increased investments in our Fright Fest and Holiday in the Park events including the incremental costs to operate Holiday in the Park at Six Flags St.

Louis and Six Flags America for the first time ever this year.

Strong revenue growth and disciplined spending lifted adjusted EBITDA to $76 million a $13 million or 22% increase over 2005 (sic - see press release "2015") and an even more impressive $29 million or 64% increase over 2014.

Adjusting for foreign currency exchange adjusted EBITDA was up $16 million or 28% over the prior-year quarter.

We are very pleased with the continued success that we've had in our fourth-quarter results as we have grown from a loss, prior to 2010, to $76 million of adjusted EBITDA this year.

Our modified EBITDA margin was up more than 300 basis points in the quarter.

Moving to the full-year performance attendance grew to a record high 30.1 million guests an increase of 1.6 million or 5%.

Total revenue for the year increased $55 million or 4% over 2015 driven by increased attendance and a 37% increase in international licensing revenue partially offset by foreign currency exchange.

Adjusting for foreign currency exchange, total revenue was up $69 million or 6% with admissions revenue up 5% and in-park revenue up 6%.

Guest spending per capita decreased $0.53 or 1%.

Without the foreign currency impact, guest spending per capita would have been essentially flat in 2016.

Our superb product offerings and innovation provided us with the opportunity to increase pricing across all of our ticket types in 2016.

However, both admissions per caps and in-park per caps were dampened by the higher mix of season pass and membership attendance, which increased to 60% of total attendance in 2016 versus 56% in 2015.

Cash operating and SG&A expenses increased 3% in 2016 representing 50.4% of revenue versus 50.9% in 2015, a 50 basis point improvement.

Although we did face some headwinds from the increase in seasonal wages in certain markets we were able to leverage our cost infrastructure and increase our margin again this year.

We achieved adjusted EBITDA of $507 million in 2016 an increase of $25 million or 5% over 2015.

Adjusting for foreign exchange, adjusted EBITDA grew $32 million or 7%.

Full-year diluted GAAP earnings per share was $1.25 versus $1.58 in 2015 a decline of $0.33 due to an increase in non-cash compensation associated with the probable achievement of Project 600, a long-term growth target set forth in 2014.

We currently have net operating loss carry-forwards and based on current projections we continue to anticipate paying minimal taxes through at least 2018.

Total capital spending in 2016 was $129 million, which included approximately half of the $18 million of incremental spending we were making before opening our new water park in Oaxtepec, Mexico.

We expect to spend the balance of the capital associated with the water park in the first half of 2017 which will be incremental to our 9% of revenue capital spending target.

In future years as we grow our international licensing revenue we will have the opportunity to reduce our capital spending is a percent of revenue.

Reported net debt as of December 31 was $1.5 billion.

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

Our strong financial position allowed us to lower the borrowing rate on our $545 million Term Loan B credit facility by 25 basis points in December, saving $1.4 million annually in interest costs.

Given our low leverage, strong cash-flow attributes, and significant revenue growth opportunities, we continue to monitor the credit environment to evaluate a potential increase in leverage to enhance our share repurchase program.

As a result of our strong early momentum with season pass and annual membership sales our active pass base at year end was a record high, up 15% from the previous record set in 2015.

Deferred revenue is also at a year-end record high of $124 million, a $27 million or 27% increase over prior year.

In the fourth quarter we grew our quarterly dividend by 10% to $0.64 providing a very attractive dividend yield of more than 4%.

We remain committed to growing our dividend every year as we have for seven years in a row.

Our future growth opportunities provide us more than sufficient cash flow to fund the growing dividend well into the future.

We believe our stock continues to represent a great investment and anticipate continuing to use excess cash flow to repurchase shares.

We repurchased $92 million or 1.6 million shares in the fourth quarter taking full-year share repurchases to $212 million or 3.7 million shares.

As of December 31 we had $342 million remaining on our Board-authorized share repurchase program.

On another topic, we would like to update you on the status of our IRS ruling request, as it relates to the possible formulation of a REIT.

As you may know, in 2015, we requested a ruling from the IRS regarding whether certain of our rides and other assets would qualify as real estate for REIT purposes.

The IRS recently notified us that they believe the final regulations were clear as it relates to specific types of assets that we highlighted in our request and that providing a ruling on those assets would equate to a comfort ruling which they, as a matter of policy will not do.

We and our advisors view this outcome to be positive.

Our next step is to move forward to evaluate the merits of implementing a REIT spin-off in light of all relevant factors including any proposed tax reform legislation coming from the new administration and the overall impact to shareholder value.

In summary we were very pleased with our fourth-quarter and full-year performance.

As we look ahead I want to take a moment to discuss changes to the 2017 operating calendar.

In 2017, Easter falls in the second quarter versus the first quarter in 2016.

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

We anticipate that approximately 350,000 to 400,000 of attendants will shift from the first quarter into the second quarter when you compare 2017 with 2016.

This is simply a shift between quarters over the course of the full year, excluding the incremental days associated with our new Mexican water park, we anticipate a similar number of operating days as 2016.

And now I'll turn the call back over to John.

John?

Thank you Marshall.

2016 was another incredible year and our team is ready to deliver another record-breaking year in 2017.

Our ride lineup for 2017 promises to be our best ever.

We are taking advantage of previous investments we made in ride innovation to rollout two of our blockbuster rides to other markets.

The Justice League Battle for Metropolis dark ride's that have received huge industry recognition and positive guest feedback, will be rolled out to three more parks this year.

Similarly we are introducing the Joker our highly successful 4D free-fly coaster at three other parks.

In addition, we are introducing the world's first rocket blast water coaster at Six Flags Fiesta Texas in San Antonio.

Our growth prospects have never been better.

The key areas that have driven our growth over the last seven years will continue to drive our success in the future.

The first area of growth is increasing attendance through further penetration of season passes and memberships.

As Marshall said 60% of our attendance already comes from our active pass base.

Because the active pass visits three to four times per year the remaining 40% of attendance that visits on a single-day pass represents a large majority of the unique visitors to our parks.

We have tremendous opportunity to convert the single-day pass holders and continue driving our season pass penetration strategy for many years to come.

As long as we have excess capacity and our parks we can add additional tenants with little incremental cost.

In fact we are nowhere near peak capacity.

The investments we are making in new themed areas, rides, and special events have allowed us to spread out our attendance over the course of the year and to increase our capacity.

We are investing more each year in our Fright Fest and Holiday in the Park events and this spring we are testing a Mardi Gras event at Six Flags Fiesta Texas and Six Flags Mexico featuring parades with authentic New Orleans Mardi Gras floats southern creole soul food and many other unique Mardi Gras festivities.

These special events provide our Company with four clear seasons to market to guests.

Our spring break Mardi Gras early in the year, our core summer operating season, our Fright Fest Halloween event in the fall, and our Holiday in the Park event in the winter.

We are also increasing capacity by opening our new water park in Oaxtepec, Mexico.

We are very excited about this opportunity and anticipate a fairly quick payback.

The second area of growth is our strategic approach to ticket high-margin pricing.

We have continued to reduce discounts and have taken prices on all of our tickets up by 3% to 5% annually over the last few years.

We anticipate we will continue to grow pricing for years to come.

The third area of growth is leveraging our increasing attendance to drive high-margin, in-park revenue especially our all-season dining pass.

We were the first to introduce the all-season dining pass and it has been a huge success.

We have made up-front investments and learned valuable lessons to optimize our marketing, pricing, and product offerings, making this an extremely popular product.

Although it is rapidly growing, sales penetration of the dining pass still remains low providing further opportunity to leverage our ever-growing season pass base.

We have similar opportunities with photos, flash pass, shopping and other products that provide a significant opportunity to encourage repeat visitation and gain additional discretionary spending from our most loyal guests.

The fourth area of growth is our international licensing strategy.

Six Flags has a unique brand that resonates with people around the world.

And we're just beginning to realize its potential.

Our first theme park outside Shanghai and our park in Dubai have both already broken ground and are progressing nicely toward their openings in mid-to-late 2019.

As we announced yesterday we have begun performing project services for the second theme park and water park in China and continue to have very promising discussions in several other countries.

We are able to scale our organization to the opportunity and because the parks require no direct financial investment on our part, international park openings are only limited by our ability to find new partners and suitable sites.

North America represents less than 7% of the world's population but generates almost half of global theme-park attendance.

The opportunity to expand our brand internationally and capitalize on the under penetration of theme parks outside of North America, is substantial.

We expect international licensing to be a significant growth driver for many years to come.

We have now posted seven record years in a row and momentum is stronger than it has ever been.

We are laser focused on achieving both our 2017 target of $600 million of modified EBITDA and our new 2020 aspirational target of $750 million.

Our ongoing success comes primarily because we have the best people in the industry working at Six Flags and it is my honor to lead this team into the future.

We have significant momentum in attendance a 15% increase in our active pass base, an exciting lineup of new rides and attractions, and a robust pipeline of international development opportunities.

We are very well-positioned to deliver another record year for our shareholders in 2017 and to continue building on our progress in the years ahead.

So, before I open up the call for your questions I wanted to take a moment to personally thank Nancy Krejsa, who is retiring at the end of this month and who was recently named to our Board of Directors.

Nancy has been one of the key drivers to this Company's success over the last six years and we have an outstanding person to fill her shoes.

We are very fortunate to have Nancy on our Board.

So, operator at this point could you please open the call for any questions?

(Operator Instructions)

Barton Crockett, FBR Capital Markets.

Okay great thank you for taking the question.

I guess one of the things that I was interested in is to drill down a little bit more on the situation in Vietnam.

So, you describe that as a timing issue.

You don't expect -- you expect that project to continue a pace.

I was wondering if you could give us some more detail around what happened and what you think the timing might be in terms of beginning to resume license fees from there?

Barton, good morning.

Regarding Vietnam we are not going to get into all of the specifics in terms of what has occurred there in terms of our partner going into default on the agreement.

But what I would say is that we have the utmost confidence that we will be able to remedy the situation.

As Marshall had said, we have provided our partner with a notice of default.

We are currently working with our partner to remedy that and we believe this is a timing issue.

Vietnam continues to be a great market for us and our hope is that we will get this project back on track but if we don't, we still view that as a great market and there are other partners that we could aggressively pursue.

Okay so you can't say at this point that you would expect to get fees this year from Vietnam.

That's, at this point, unknown, is that what you are saying?

If you could correct me if I'm wrong?

Yes, our hope is that we can get this back on track relatively shortly and then get back to the norm in terms of recognizing revenue.

Okay, all right, great.

And then in terms of the virtual reality coaster which you guys called out as a positive factor for the year.

I think that there's a lot of skepticism in some quarters around that partly driven by Cedar Fair's more cautious comments about technology in the implementation of roller coasters.

Could you give us some more detail that would support your belief that this has been positive for your business?

Well, Barton I have to say there's been absolutely no skepticism on our end.

Virtual reality has been a great driver for us in terms of generating attendance.

As I mentioned, our view is to offer it to all of the guests and I think it has driven attendance.

There were some learning curves early on from an operational standpoint point but we quickly made our way through.

And if you think about VR, we're still extremely excited about VR.

As I mentioned there's really minimal costs associated with this.

Our guests love it and it's completely flexible.

As you saw in 2016 we were able to modify that offering around our Fright Fest event and then modify it around our Holiday in the Park event.

In 2017 we are taking it to another level with mixing virtual reality with augmented reality.

So, we have mixed reality.

I think in addition, we are going to put complex game play on it.

So, basically what it will allow people to do as they are riding this with virtual reality, they can, at any point in time in that experience, elect a certain path to take and that gives them a totally different experience every time they come on the ride.

Between the fact that people love it, our guests, that we've gotten high marks from our guests, the fact it's low capital, low-cost, it's totally flexible, I think makes it perfect for us to continue to take this to another level.

Now, others are skeptical of many of our initiatives including our hybrid coasters.

If you remember, people said our guests don't want hybrid coasters and now you are seeing people replicate that across the system.

Same thing with all-season dining.

So, for us it's all about innovation and we clearly are the leader in innovation.

Okay and then just one final thing on tax.

Could you just update me what your NOL balance was at the end of the year?

And then as you go through this process of evaluating whether or not to become a REIT, I think many of us would assume that because you made the application, you're probably more biased towards becoming a REIT than not.

But I was wondering if you could clarify whether you're leaning one direction or other and what the puts and takes are as you evaluate this?

Good morning, Barton.

So, the actual balance of the NOL is about $226 million at the end of the year, plus some excess tax benefits that are not on the balance sheet.

So, again we don't expect to pay any material taxes until 2019.

In terms of the REIT, really the first step in the process was to get comfortable that we can become a REIT.

Now that we are comfortable that we can the next step would be to complete the due diligence and we will move forward if we believe it's good for the shareholder so we don't have a bias really one way or the other.

We're just going to go through the due diligence and determine if we think it's best for the shareholders.

I think Barton, it's -- now that we are in a position where we feel comfortable that we could create a REIT, now we need to do the work necessary to see if that's a viable option and it will create shareholder value.

So we are beginning that process and we expect to make a decision within the next year.

Okay would it make sense to wait until we see what the tax law is before making a decision?

Absolutely.

That is one of the things that we will definitely have to factor into this.

Okay great.

Thank you very much.

Thank you.

Tim Conder with Wells Fargo.

Thank you and John, Marshall, everybody, congrats on a great team and not a bad way for Nancy to go out either.

Well thank you, Tim.

A couple of things here gentlemen -- and Steve also congrats on the new duties.

Thanks Tim.

Just a couple -- if you could just remind us here, the international fees in Q4 and for total 2016 net of Vietnam along with the expenses, Marshall if you have that number and the comparable number for 2015.

And then John, I know historically, you haven't given too much on this, but we'll ask it anyhow, any color on attachment rates of season dining and beverage plans to either your traditional season passes or your membership guests?

Well Tim, let me take your second question.

As I mentioned we are very pleased with what we've seen on our all-season dining program and we're actually introducing even more, I'll say related-type of passes, like all-season photo pass, all-season retail pass.

As it relates to the all-season dining we've talked before about how we think that really could be a big driver for us in terms of our future growth.

Right now, and again we've seen great penetration, but right now it's still relatively low so I think it's still continues to be a big opportunity for us.

Tim, we talked in the past about the fact that we get more than twice the amount of revenue from a season pass holder than we do from a one-day ticket holder.

If you factor on all-season dining that's well above three times.

So, when you look at our growing season pass base, the more of those people that we can convert and add an all-season dining pass to, which has an average price through our system of about $85, that's a huge incremental growth driver for us.

So, we are pleased with what we've seen to date and we continue to believe this is a great growth opportunity for us.

I'll let Marshall talk about international.

Good morning Tim.

The international revenue for 2016 was $22.6 million, which was about $6.2 million higher than last year -- what, $16.4 million.

And EBITDA was $18.7 million in 2016 which is about $5.5 million higher than the $13.3 million we made in 2015.

Okay.

So, Tim, even though we said that if you factor out the Vietnam issue it would have been flat for the quarter, we talked before about, it's going to be lumpy from quarter to quarter.

So really the focus is to look at it on a full-year basis and to the extent that even with excluding the Vietnam, we were still up 37% at international, I think talks to our opportunity there.

Okay.

John, staying back on the -- and thank you for the color on the 3 times versus 2 times, very helpful there.

Any -- as we have completed now another year, any change in spending levels on a per cap basis here between a traditional season pass and a member for 2016?

How did that turn out versus historically?

I think in terms of the -- I'll start by saying we really don't see any difference between season pass holders and members in terms of the spending in the park.

It's fairly consistent.

We have seen incremental spending from both our season pass holders and members if you look at it on a year-over-year basis.

One of the reasons -- there's a number of reasons for that, one is we continue to look at innovative ways within the park in terms of our overall product, so we're adding new products every year.

Things like our events, Fright Fest and Holiday in the Park, bring more people to the park and they are spending more money at each one of these events.

I think that people have a little bit more money in their pocket.

So, our overall guest spending across the board, whether it be season pass members or one-day tickets, has continued to increase.

Okay and then two more if I may, one housekeeping, Marshall, just any update on CapEx, D&A expectations.

And then John, what would you term the probability that -- excluding Vietnam, of additional announcements related to international here in 2017?

Okay your first question was on CapEx, Tim?

Yes and DNA, Marshall.

So, for 2017 our plan is to be at about 9%, maybe slightly less than 9%, plus the other half of the Mexico, the $18 million that we are spending in the Mexico water park.

And then what was your other question?

I missed your other question.

The D&A.

The other question was on Vietnam.

Tim just to add on the CapEx side, we are, I would have to say, one of the most efficient in the industry in terms of our CapEx spending.

The beauty is that as you look at our international business, as we have talked before, it requires no capital on our part.

As you think about going forward, as we continue to grow that international licensing revenue where there is no capital associated with that, over time we're going to be able to bring that down below that 9%.

And if you look at our capital spending we believe it is the right amount of capital spending.

Just look at what we've been able to accomplish over the last several years but in particular our attendance growth that we saw in 2016, our continued success around our season pass, and the fact that our parks have never been in better shape than they are today.

I also want to point out that typically when we go in with a new ride, we will reinvent that whole area around the ride.

As I said our parks are in great shape.

I think we will have the ability to continue to take that down as a percentage of revenue as we grow international.

On our ability to grow and get new deals in 2017 obviously, we were very pleased with our announcement that we had yesterday adding our second park in China outside of Chongqing, so that will deliver revenue for us in actually two parks, it's a theme park and a water park.

That will meet incremental revenue in 2017.

And even though I can't talk to you in terms of other deals that may be pending I have to say I've never felt better about the pipeline of deals that we have in place.

I am highly confident that we will be announcing more deals in 2017.

Okay, thank you, gentlemen.

Ian Zaffino, Oppenheimer.

Hey guys this is Mark Zhang on for Ian, thank you for taking my question.

I just have a quick -- a few quick questions.

In regards to the new China deal is this the same economics is the previous deals?

Or is there anything that we should keep in mind for this one specifically?

It is similar economics to the Haiyan deal that we announced.

Okay, got you.

Thank you.

And then in terms of activity for off-season events this year, do you think this might be a tougher comp for next year given the favorable weather that we've had in the northeast?

Well, I have to say Mark, that if you look at our success particularly in the fourth quarter I would say that the weather was fairly normal.

I think our success is due to the fact that we: one, continue to invest in these events giving more and more people reasons to come to the park and then our success around our season pass and particularly the success we saw on our fall flash sale.

So I think that's actually what drove our great performance in the fourth quarter.

I would have to say weather was fairly neutral.

Got it.

That's what I was kind of thinking, I just wanted to make sure.

Thank you, guys.

Think you.

James Hardiman, Wedbush Securities.

Hi, good morning.

Good morning, James.

Congrats on a strong finish to a really good year.

I had a couple of follow-ups that I think are fairly important.

First, on the IRS thing -- sounds really positive.

Can you revisit what you said in your prepared remarks about what exactly the IRS had told you?

You were basically talking about this as if the decision is now up to you in terms of becoming a REIT.

Is that correct or are you still waiting to hear back from the IRS on incremental rulings?

Yes, James, that is correct.

They basically came back to us and said that for the specific assets that we were talking about, they were covered in the final regulations that they had and that giving us any letter would be a comfort ruling, so they don't give comfort rulings on the REIT.

So, yes it's positive.

We can do what we want and so the next step will be deciding whether or not that's something we want to do.

Okay, and just so I'm clear were you aware of this when you made your last dividend increase and put another way as we look forward, would you be able to grow your dividends if you didn't get some relief on the tax front over the next couple of years?

Do you think the trajectory is such that, independent of that, you would still be able to have the cash to fund an increasing dividend?

So, your first question first, we did not know.

It was a recent event when we talked to the IRS, so when we increased our dividend we didn't know.

And apart from that we're very comfortable.

We think the dividends are an important part of our value proposition.

And so we are committed to having a sustainable and growing dividend going into the future even after we become a taxpayer.

Once we become a taxpayer even using some modest estimates of growth, we will continue to be able to raise the dividend.

So we're still committed and we believe no matter what happens with the REIT we will be able to continue to raise it.

James just to add on to that, Marshall is absolutely right.

As you think about our dividend we've talked all along about how our strategy is to have a dividend that has an attractive yield that's sustainable and we can grow every single year.

And we've done that.

We will be able to do that even if at some point in the future we were to become a taxpayer at the current tax rate.

So the REIT actually played absolutely no basis into our recent increase to our dividend.

That's really helpful and really encouraging.

And then just a real quick clarification, the $5 million in terms of reversal for Vietnam, if things go as you would expect and you get that cleared up, is that a $5 million we would be adding back at some point in 2017?

Yes to the extent that we can get that whole project back on track it would be an incremental $5 million that we would pick up in 2017.

Great.

And then just lastly for me, the fourth quarter attendance growth of 22% that's pretty astounding.

But by my math you're up 48% in the last two years, 70% in the last three years.

Those are amazing numbers.

To the extent possible, can you talk about how much of that was, for lack of a better term same-store sales growth rate, existing parks with existing attractions that grew versus the addition of Holiday in the Park at some of these parks?

And as we look forward and every year I assume that you can't continue to grow at that rate and then I continue to be surprised, can we continue to see that type of growth?

It seems like that's probably not the best way to think about it, but how should we think about the ability to continue to grow particularly in that fourth quarter where it's all about these events going forward?

James obviously we were very pleased with the attendance growth that we saw in the quarter.

And it was across all of our parks so we did see some attendance because of the two additional parks that we opened up for Holiday in the Park, St.

Louis and our DC Park.

But I would have to say the majority of that growth, that 1.6 million increase in attendance, came across the board at all of our parks, so we are very pleased with that.

I think a lot has to do with the fact that we continue to invest in both those events and we will continue to do that going forward.

The other is our success around season pass.

I think we have the ability to continue to drive season pass up.

It was 60% of our attendance in 2016 but if you look at our active base, our Active Pass base represents roughly one-third of the unique guests visiting in our parks.

So, we have the ability to convert a large amount of those, still single day tickets, over to season pass.

We have excess capacity in our parks and every year we are creating even more capacity by introducing new rides, introducing new events, and things like the Mardi Gras.

Just to further on his comment, it was significantly more -- the growth is significantly driven more by existing parks this year and in prior years.

So, while we did get growth from these Holiday in the Park events this year and last year, and the year before, the growth has really come from the investments in Holiday in the Park at the existing parks, as well as the continued investment in Fright Fest.

Excellent.

Thanks guys.

Thank you James.

Tyler Batory, Janney Capital.

Thanks, good morning everyone

Good morning, Tyler.

Question for you on Holiday in the Park.

Can you comment on the extent to which that event is driving pass sales?

In other words are you seeing more pass sales or better retention rates at the parks that have that event compared to those that don't have it?

Tyler, I think it's a clear driver of season pass sales and we talked about that.

The more that we can do in terms of adding things like some spring break events and then Mardi Gras and then we'd launch at the end of May -- launch our new capital, we are looking at things in terms of what we can do in the summer, maybe some July 4 Fest, and then with our Fright Fest and Holiday in the Park, every single one of those creates more reasons for the people to come to the park many times during the year.

When they do that they see the tremendous value of season pass.

Absolutely, HIP plays into that and as we launch HIP at parks, we do see a nice pickup in our season pass sales.

I'd like to add to it that our membership retention for members that have been with us for longer than 12 months, we've been able to increase that because now the off period, if you will, the time between closing and opening has been narrowed in most parks, from early January to March or April.

So, it's really only one month or two months that they can hang in so it's helped our retention for membership as well.

Okay that's great and then just generally on costs, what are your expectations for minimum wage increases in 2017 compared to what you saw in 2016?

So, the minimum wage for 2017 will be similar, about $5 million.

It will be driven again by California, and particularly LA County, which will be going up [$1.50] in January and another $1 in July.

Our goal and plan is to continue to absorb those costs and continue to drive EBITDA like we have over the last several years.

And Tyler obviously mandated minimum wage and some market pressures that we have seen in some of our parks absolutely does impact the cost.

But I have to say that if you look at some of our highest growth, from an attendance and a guest spending standpoint, have been in those parts where we have seen wage pressures.

So, even though it impacts costs I think there's actually a positive aspect as well.

Okay great that's very helpful.

That's it for me.

Thank you.

Thanks Tyler.

This does conclude the Q&A session for today's program.

I will hand the program back over to Steve Purtell for any additional or closing remarks.

Thank you for joining our call today and I want to express my appreciation for all of your support.

I look forward to building on the success we have achieved of the past seven years.

This is a great industry and there is no better brand than Six Flags in the global regional theme parks base.

We are providing affordable family entertainment and we consistently deliver guest excellence, innovative products, and attractions and remarkable financial results.

Please do come out and visit one of our amazing parks in 2017.

Thank you for joining our call and take care.

Ladies and gentlemen this does conclude the Six Flags fourth-quarter and full-year 2016 earnings conference call.

Thank you for participating.

You may now disconnect.