Industry > Six Flags News

Six Flags Investor Meeting November 4, 2010, NYC

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GADVwow:
Note that excess land is identified as an income opportunity, with 700 acres identified in New Jersey, 300 in DC, and 240 in St. Louis

10:15 AM EDIT:  "In today's market we do not have any intention of disposing of that land, but we think it adds value to our balance sheet."

GADVwow:
Finally, after nearly an hour, nearly acceptable audio.  Thomson Reuters produced this.  They should refund any money SIX paid for this...there were even instances when you could hear the technicians talking to each other, electronic devices beeping like crazy, and way too much static.  Pathetic.

GADVwow:
Q and A:

* The single greatest measure of our success is share price, driven up consistently over time, not in a short term way.

* There is opportunity to drive attendance, but given the economy and the way things are, we don't want to count on it...We also need to manage the cost side.  We are fairly fiscally conservative...we don't have the marketing guy who spends a lot of money.

* Merge or acquire someone?  Very difficult to speculate on.  Laser focused on SIX itself...want to operate as effectively and efficiently as possible.  A year or two from now we may be able to think about other things.  There could be some scale benefits to that.

* Of the 80 to 90 million capex, how much is maintenance vs. new capex for new attractions?  Any company need innovation and needs news.  We need to be investing in this recurring revenue stream to pay dividends for many years to come.  Consistent investment, this is a tight range, we do not intend to spend much more or less...the bulk of it will be new products.  No HUGE investments, something in pretty much every park.  Smaller overall investments, but spectacular products.  Look at next year, SFMM is getting three new products, yet we stayed within that range.  About 60 percent of capex is spent on new products.  Keep the balance between teens and adults/families with kids.  The balance had tilted too far to the latter under the last management.

* How we market is going to change...not so much national and Mr. Six.  LOCAL marketing to drive people to the parks...and that requires new capital...the NEW at the LOCAL park, that is what drives people to the parks.  More focused approach to marketing.

* Q: '10 had GREAT weather.  How will that affect comparisons next year?  Actually '10 was typical weather, '09 was the horrible year...'10 only looks great compared to '09.  Going forward, weather clearly has some impact, but no big change in '10 compared to normal..plus because we are so widespread and have the waterparks, we have hedges against bad weather...hot, dry helps the waterparks while dipping the dry parks a bit.

* No reason to anticipate the dick clark productions dividend to regularly recur...it is not an annual thing.  SIX relies on organic growth of the business, not dividends from dick clark productions.

* Steps to increase admissions per cap?  Pricing is very tricky, there are a lot of pieces.  Season pass, consumer daily demand and group sales are the three facets.  Low hanging fruit includes playing the discount card less hard, the competition gave significantly less discount than SIX, fencing--time limited--don't offer when you have inherent demand, or at least be more surgical about it.  Look at our competitors as opposed to what SIX has been doing.  Not as complicated to make those early movements as you may think it is.  This is not a radically move on pricing...a few years ago tried to go up double digits, people see that and attendance will drop.  We are talking tweaking and a little bit tougher on discounting and fencing.  We can do that.  In a careful way.

* Is something different in pricing from Cedar Fair?  Reid-Anderson:  A great company with very good leadership, they have more of a destination element, but look at more recent EBITDA and compare us to them, the gap is starting to diminish.  Al Weber:  Cedar Fair is good at managing between the three buckets (SP, daily and group).  We need to do that.  WE are in 9 of the top 10 DSMAs in the country, we have more opportunity.  Reid-Anderson:  We have more people within 100 miles of our parks, many more.

* Frequent guest program?  How much cost efficiency, what inning are you in?   We do have a season pass program with significant benefits.  SP is the best value in every market, they come multiple times, we have programs to stimulate ongoing visits, the core of our loyalty piece.  It is the center of our frequency driving program.  Highest admission and in park revenue we can get from a person.  We want them to revisit, we want them to come to our park.  In terms of cost, $22 million in year to date cost reductions...a lot of those occurred in 2010 in the last three to four months particularly.  There will be more incremental cost reductions next year as well.  Took down headquarters cost fairly radically, we have head count reduction, we are going to become more efficient in seasonal labor, in procurement, a whole series of steps to become as efficient as we possibly can.

* Lowest leveraged in the industry, what is your ultimate view of your capital structure?  Debt is very inexpensive right now, do you really want to pay off too much debt?  We will not disclose what our optimal debt ratio is.  We feel good about where we are today, we are better than competitors, we are seeing increases in our credit rating, we may reduce interest costs...as to uses of cash, we are delivering very solid cash flow, we will analyze how to use that and will disclose to shareholders at the right time.  Nothing is sacred, we want to optimize shareholder value, no program to disclose right now.  Multiple opportunities we can take a look at.

* How do you balance recapturing the teens with keeping the family focus?  After all, some teens repel some families?  Successful regional theme parks balance both groups...programmatically separate the groups, like concerts, you have to be intentional about it.  Segregate by messages, on the urban station be teen focused, on the Mum's station, emphasize family.  Broad thrills, and a lot of younger kids are aspirational.   The 9 year olds are riding these coasters, so are Moms and Dads.  Manage the parks and the marketing message.  It's psychographic, not just ages.  A small kids roller coaster is also about thrills, not just children.  We will work had to achieve the balance to pull both groups in.

* We are not closing the New York headquarters, it is just a smaller group of people.  It is no longer the headquarters, which is now in lower cost Dallas.  We are reducing marketing costs, but the spending is much more efficient.  No huge swing going forward on those costs.   Future capex is a bit of a different approach.  It brings innovation...no longer $40 to $45 million on one product.  More products bringing news to every market.  (Translation:  The days of huge new coasters are over).  '11 decisions were tweaked but are somewhat those of old management.

* How much of your capex is in reaction to competitive moves?  A lot of the true competitives are in other markets, though California is a bit different.  Very little of our capex is reactionary.  It starts with the park asking for what they want, and John Odin and associates decide what is going to drive return on investment.  Except for L.A., we really dominate our own markets from a geographic standpoint and a marketing standpoint.

* With regard to dick clark productions, we have a 39 percent share and we intend to maintain that...it's been a very good investment.  Our partner sponsors renew at a very high rate, but we want to look at six to eight week packages, too...such as movie studios.  Fright Fest, presented by Snickers is an example.

* Plan for increasing per cap revenue from SP holders?  Per cap on SP is not what we focus on tremendously.  We focus on the price of the SP.  Revenue focus, but we bundle it and add value.  Per cap is not as meaningful on SP.  On group sales, we are lessening discounts.  We have seen a nice rebound in group business, but schools may be more price sensitive, for example.  Over time, you will see price increase...the total dollar price of SP will nudge up over time, but incrementally over time.  We do not divulge what percentage of our admissions is SP...that's proprietary.

* Our group sales business has come back but not to 2009 levels.  We have a great team focused on this.

* How do gasoline prices affect you?  Minimal effect, but when it pops up over time...related to economic climate, but as prices rose we got kind of a benefit as people stayed close to home and cut the distance they wanted to travel.  Even when over $4, not that much of an effect.  The relationship to drop in business is just not there.

* An apology "it was hard listening and not being here."  Take care, let's end the call now.

GADVwow:
The market apparently liked what it heard:

Today, SIX closed at $52.75, up $2.15 or 4.25 percent on more than five times the average daily volume.

rjholla2003:
Thank you for the GREAT breakdown of the call. I like what I'm hearing, now it's all about execution.

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